This will be best year for economy since 2007, says PNC's Stuart Hoffman

Stuart Hoffman on 2014 and the economy: "The punchline is this will be the best year we've seen in awhile."

Stuart Hoffman, the chief economist of Pittsburgh-based PNC FinancialServices Group Inc., delivered an upbeat prediction for the U.S. and regional economies Tuesday at PNC Bank's annual economic luncheon at the Detroit Athletic Club.

He said disappointing economic data for January and February, including housing numbers, car sales and employment, are weather related and not signs of an economy that is slowing down, and that 2014 will be the best year since the recession began in 2007.

"The never-ending winter's effect has been a slow start to the year, but the economy is poised to do better," he said. "The punchline is this will be the best year we've seen in awhile.

"We've been stuck in a 2 percent growth rut. This year, finally, we'll get growth at 3 percent," he said, referring to the rate of growth in the gross domestic product.

Hoffman said that while auto sales have been sluggish so far this year, he expects 2014 to see U.S. sales of at least 15.9 million units, up from 15.6 million in 2013.

He said a slow start in employment — 113,000 new jobs in January and what he thinks will be a figure of at least 150,000 new jobs in February when figures are released Friday — will pick up sharply the rest of the year.

Hoffman predicted there would be 2.5 million new jobs in the U.S. this year, an average of more than 200,000 per month.

He clicked off a bullet-point list of other reasons to be bullish.

Consumer spending drives 70 percent of the national economy, and consumer confidence is up. "We won't go on a spending spree. We won't pile up debt. But we will be spending more," he said.

Businesses will begin investing some of the $2.5 trillion in cash they have on hand, in large part because much of the uncertainty about Washington has eased, with an agreement on a new debt ceiling and no prospects for a government shutdown. "The federal government has gone from being a head wind — hot air in our faces — to being a neutral."

The housing market will continue its recovery. "It should do well the rest of the decade," he said.

Domestic supplies of oil and natural gas, some of it from fracking, will continue to be plentiful. "The energy story in the U.S. is amazing. We're actually producing more oil in the U.S. than we were 40 years ago," he said.

Many state governments are starting to accrue budget surpluses, and local units of government, buoyed by rising property taxes with the rebound in housing, are close to having surpluses and are starting to hire again.

Hoffman said there are reasons for optimism globally, too, the turmoil in the Ukraine notwithstanding. He said it is too early to predict any economic outcome from events there.

He said China and Japan will continue steady growth of about 7 percent; Europe is out of its recession and will have growth this year of 1 percent to 1.5 percent; and the U.S.'s biggest trading partners are relatively healthy, with GDP growth in Canada of about 2.5 percent this year and unemployment in Mexico under 5 percent.

"Those vampire economists who only come out at night? The ones who come on CNBC when the markets are down to tell you things are going to get worse? Ignore those people. I can come out during the day and tell you things are going to be good," said Hoffman.